Decision Callaghan

8/14/2019 Decision Callaghan

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Federal Court Cour fdrale

Date: 20100118

Docket: T-838-07

Citation: 2010 FC 43

Ottawa, Ontario, January 18, 2010

PRESENT: The Honourable Mr. Justice Martineau

BETWEEN:

L.G. CALLAGHAN IN HIS CAPACITY AS

OFFICIAL AGENT FOR ROBERT CAMPBELL

AND DAVID PALLET IN HIS CAPACITY AS

OFFICIAL AGENT FOR DAN MAILER

Applicants

and

THE CHIEF ELECTORAL OFFICER

OF CANADA

Respondent

REASONS FOR JUDGMENT AND JUDGMENT

[1] The Court is called upon to examine the role exercised by the Chief Electoral Officer(CEO), the named respondent in this application for judicial review, under Part 18 Financial

Administration of the Canada Elections Act, S.C. 2000, c. 9 (the Act). Of particular importance to

this application are the provisions related to the reimbursement of election expenses claimed by

candidates who have participated in a federal election.


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[2] The 39th general election took place on January 23, 2006 (the 2006 election). On or around

April 23, 2007, the respondent sent letters to a number of candidates of the Conservative Party of

Canada (the Party) who participated in the 2006 election, informing them of his decision to refuse to

certify certain advertising expenses which had been claimed as election expenses.

[3] The applicants act as official agents of two Conservative candidates, and were among the

recipients of these refusal letters. As such, they challenge the legality of the CEO's decision to

refuse to certify certain advertising expenses claimed by their particular campaigns (the impugned

decisions). They request that the Court set aside these two decisions and force the respondent to

deliver new certificates to the Receiver General of Canada (Receiver General) which include the

claimed advertising expenses.

[4] While the Court does not endorse all of the arguments made by the applicants, the impugned

decisions should be set aside and the matter referred back to the respondent with appropriate

directions.

[5] In reaching the above conclusion, the Court has considered the totality of evidence filed by

the parties in this proceeding, the representations made by counsel in their written material as well

as at the five day hearing held November 23-27, 2009, and the additional documentation and

submissions put forward by both parties after the hearing.


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I LEGISLATIVE FRAMEWORK

[6] Prior to examining the facts relevant to the present application, it is necessary to highlight

the purpose of the provisions found in Part 18 of the Act. These provisions deal with, and assist the

Court in understanding, the election spending limits, the obligations incumbent on official agents

and the basic principles that govern the reporting and reimbursement of expenses incurred by

candidates in a federal election.

A SPENDING LIMITS

[7] In 1991, the Royal Commission on Electoral Reform and Party Financing (the Lortie

Commission) underscored the importance of spending limits with regard to electoral fairness.

Among other things, the Lortie Commission made a correlation between political communication,

spending limits and voter behaviour. It was noted that political communication has a known effect

on voters and that inequalities in the spending capacity of participants (i.e. candidates and/or

registered parties) in an election would have a considerable impact on the outcome of the vote, since

participants with greater resources would be able to communicate more frequently and with the

assistance of different media (Royal Commission on Electoral Reform and Party Financing,

Reforming Electoral Democracy, vol. 1 (Ottawa: Communication Group, 1991) at pages 324 and

339 (Chair: Pierre Lortie)).

[8] Six years later, inLibman v. Quebec (Attorney General), [1997] 3 S.C.R. 569, the Supreme

Court of Canada confirmed the importance of spending limits in the electoral context. At paragraphs

47 and 48, the Court noted that spending limits are essential to ensure the primacy of the principle


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of fairness in democratic elections and that [f]or spending limits to be fully effective, they must

apply to all possible election expenses...

[9] In 2004, Justice Bastarache, writing for the majority of the Supreme Court of Canada in

Harper v. Canada (Attorney General), 2004 SCC 33 at paragraphs 102 and 103 (Harper), remarked

that [t]he primary mechanism by which the state promotes equality in the political discourse is

through the electoral financing regime and [i]f Canadians lack confidence in the electoral system,

they will be discouraged from participating in a meaningful way in the electoral process.

[10] At paragraph 62, Justice Bastarache mentions that Parliament has adopted the egalitarian

model of elections, which seeks to create a level playing field; he notes in this regard:

62. [...] Thus, the egalitarian model promotes an electoral processthat requires the wealthy to be prevented from controlling theelectoral process to the detriment of others with less economic

power. The state can equalize participation in the electoral process intwo ways; see O. M. Fiss, The Irony of Free Speech (1996), at p. 4.First, the State can provide a voice to those who might otherwise notbe heard. The Act does so by reimbursing candidates and politicalparties and by providing broadcast time to political parties. Second,the State can restrict the voices which dominate the politicaldiscourse so that others may be heard as well. In Canada, electoralregulation has focussed on the latter by regulating electoral spendingthrough comprehensive election finance provisions. These provisionsseek to create a level playing field for those who wish to engage inthe electoral discourse. This, in turn, enables voters to be better

informed; no one voice is overwhelmed by another. In contrast, thelibertarian model of elections favours an electoral process subject toas few restrictions as possible.


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[11] Section 422 of the Act sets out the formula used to determine the maximum election

expenses a registered party may incur during an election. Pursuant to section 423, no chief agent

shall incur election expenses on behalf of a party which exceeds the party's spending limit.

[12] The formula used to determine the maximum amount that a candidate may incur as election

expenses is set out in sections 440 and 441 of the Act. Pursuant to subsection 443(1), no candidate

or official agent (or person authorized to enter into contracts under paragraph 446(c)) shall incur

election expenses that exceed the campaign's spending limit.

B ROLE OF THE OFFICIAL AGENT

[13] Before accepting a contribution or incurring an electoral campaign expense, all candidates

must appoint an official agent (subsection 83(1) of the Act). The official agent is responsible for

administering the financial transactions for the candidate's electoral campaign and for reporting

those transactions in accordance with the provisions of the Act (section 436).

[14] During an election, the official agent must open a separate bank account for electoral

expenses. All of the candidate's financial transactions involving the receipt or payment of money

must be withdrawn from or deposited to this account (subsections 437(1) and 437(3)).

[15] Only a candidate, their official agent or a person whom the official agent has authorized in

writing to enter into contracts may incur electoral expenses (subsections 438(5) and 446(c)). Only


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the official agent, however, can pay those expenses (subsection 438(4)) or accept contributions to

the candidate's electoral campaign (subsection 438(2)).

C REPORTING REQUIREMENTS

[16] The reporting scheme established in Part 18 of the Act constitutes an essential component of

the electoral financing regime. At the end of an election, candidates official agents and the parties

chief agents must report their contributions received and their expenses incurred in the manner

provided in the Act.

[17] Election expenses reporting requirements for a registered party are found in sections 429

to 434 of the Act. Where the contributions received and the expenses incurred by the party do not

need to be reported in the partys election expenses return, they will normally be required to be

reported in the partys annual return that must be submitted by the party for each fiscal period

(section 424). Furthermore, for each electoral district, these annual returns shall contain a statement

of the commercial value of the goods or services provided and of the funds transferred by the

registered party to a candidate or an electoral district association (paragraph 424(2)(h)).

[18] In the case of candidates, the reporting requirements are found in sections 451 to 462 of the

Act. At the end of an election, the official agent is responsible for providing the CEO with an

audited electoral campaign return which includes, inter alia, a statement of electoral and other

expenses, a statement of the commercial value of all contributions received (monetary and non-


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monetary) and a statement of the commercial value of any transfers of funds or goods and services

between the candidate and a registered party (subsections 451(1) and 452(2)(a), (b), (f), (i) and (j)).

[19] Together with the electoral campaign return, the official agent shall provide the CEO with

documents evidencing the expenses set out in the return, including bank statements, deposit slips,

cancelled cheques and the candidate's written statement concerning his or her personal expenses

(subsection 451(2.1)). Moreover, the official agent shall, on closing the bank account he or she

opened in relation to the electoral campaign, provide the CEO with the final statement of the

account (subsection 437(5)).

[20] An auditors report is also submitted to the CEO along with the electoral campaign return

and the declarations made, in the prescribed form, by the official agent and the candidate

(subsection 451(1) and section 453). The auditors report shall include in the prescribed form, a

completed checklist for audits and, as the case may be, a negative statement concerning the

accuracy and comprehensiveness of the information provided in the financial records. The

candidate's auditor fees are part of the electoral campaign expenses of the candidate (section 406).

[21] At any time, the CEO may correct a document submitted on behalf of a candidate, pursuant

to subsections 451(1) and 455(1), or a registered party, pursuant to subsections 424(1) and 429(1), if

the correction does not materially affect the document's substance (subsection 432(1) or 457(1)).

On the written application of the chief agent of a registered party or a candidate or his/her official

agent, the CEO may grant an extension of the deadline for submission or permit the correction of


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any of the above listed documents. Most notably, such discretion may be exercised where there is

evidence of inadvertence or an honest mistake of fact (see paragraphs 433(3)(c) or 458(3)(d)).

[22] Furthermore, the CEO may always request in writing that the registered party, the candidate

or the official agent correct a document within a specified period of time, subject only to the right

these three entities have to ask to be relieved by a judge from complying with the request (see

subsection 432(2), paragraph 434(1)(a), subsection 457(2) and paragraph 459(1)(a)). Such an

application is not made to the Federal Court but to "a judge who is competent to conduct a recount".

The judge may not grant an order unless he or she is satisfied that the application arose by reason of

one of the listed factors, which include inadvertence or an honest mistake of fact (see subsections

434(3) and 459(3)). See also Conservative Fund Canada v. The Chief Electoral Officer of Canada

(31 December 2009), Toronto 09-8323-00CL (Ont. Sup. Ct.) (Conservative Fund of Canada).

[23] Thus, if the CEO is made aware of the expenses that have been erroneously omitted from a

candidate's or a party's return, he may request that the return be corrected notwithstanding the fact

that a certificate has already been issued pursuant to sections 435 or 465 (addressed below). He may

also make a request for an amendment where an election expense was improperly included.

D REIMBURSEMENT BY THE RECEIVER GENERAL

[24] Section 435 of the Act governs the partial reimbursement (50%) of paid election expenses

incurred by a registered party.Inter alia, reimbursement is subject to compliance by the registered

party and its chief agent with the reporting requirements found in sections 429 to 434.


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[25] Sections 464 to 470 regulate the partial reimbursement (60%) of paid election and personal

expenses incurred by candidates during a federal election. Similar to the scheme set out for

registered parties, reimbursement for candidates is subject to the candidate's compliance with the

reporting requirements found in sections 451 to 462.

[26] Section 464 of the Act provides that immediately after an election, upon receipt of a

certificate issued by the CEO, the Receiver General shall pay a first instalment of money equal to

15% of the candidates election expenses limit (as calculated in section 440) to every candidate who

has received 10% or more of the number of valid votes cast.

[27] According to subsection 465(1) of the Act, the CEO shall provide the Receiver General with

a certificate that authorizes the payment of a final instalment if the CEO is satisfied that [, inter

alia,] the candidate and his or her official agent have complied with the requirements of subsection

447(2) and sections 451 to 462.

[28] The final instalment is the lesser of: (1) 60% of the sum of the candidates paid election

expenses and their paid personal expenses minus the partial reimbursement granted under section

464, or (2) 60% of the election expenses limit set out in sections 440 and 441 minus the partial

reimbursement granted under section 464 (subsection 465(2)).


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E OFFENCES AND CRIMINAL PROSECUTION

[29] Apart from the provisions in Part 18 of the Act that deal with the administrative treatment of

contributions made and expenses incurred during an election, the Act establishes, in Part 19

Enforcement, a concurrent scheme which permits the Commissioner of Canada Elections (the

Commissioner) to investigate any actions which may constitute an offence as defined in sections

480 to 499 (note that sections 500-508 deal with the punishment for the offences enumerated in

sections 480-499). These investigations may ultimately lead to criminal proceedings against persons

who are believed to be in contravention of the Act.

[30] If the Commissioner believes on reasonable grounds that an offence under this Act has been

committed, the Commissioner may refer the matter to the Director of Public Prosecutions (the DPP)

who shall decide whether to lay a criminal charge (subsection 511(1)).

[31] Notably, it is an offence for the chief agent of a registered party to exceed the partys

spending limit (paragraphs 497(1)(1) and 497(3)(g)). Likewise, it is an offence for the candidate, the

official agent or the person authorized in writing to enter into a contract (pursuant to paragraph

446(c)) to exceed the candidates election expenses limit as established by the Act (subsection

443(1) and paragraph 497(1)(s)).

II FACTUAL BACKGROUND

[32] The applicants, L.G. Callaghan and David Pallet, are the official agents of two candidates of

the Party, who participated in the 2006 election. Mr. Callaghan acts for Robert Campbell in the


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Dartmouth-Cole-Harbour riding (Dartmouth), while Mr. Pallet acts for Dan Mailer in the London-

Fanshawe riding (London).

[33] 308 candidates of the Party participated in the 2006 election. The Conservative Fund of

Canada (the Fund) was the chief agent for the Party. Along with 65 other official agents for

Conservative candidates, election expense claims were made by the applicants with respect to their

share in a regional media buy (RMB) program put in place by the Party (the claimed advertising

expenses).

[34] As is evidenced by the invoices submitted with the participating candidates electoral

campaign returns, the Fund appears to have been the supplier for this RMB program.

[35] The writs for the 2006 election were issued on November 29, 2005. According to the

evidence submitted by the parties, the Party developed its RMB program in early December 2005.

This program provided for pools of radio and television advertising to be offered for purchase to

selected Conservative candidates throughout Canada (with the exception of Alberta). The amount

contributed by each participating campaign was contingent on the availability of space in the official

agent's budget, taking into consideration his or her projected electoral expenses. Thus, a candidate

could contribute to a regional media buy (RMB) as long as it was within the campaigns election

expenses spending limit. That being said, a campaign could not participate in the RMB program

without the agreement of either its candidate or its official agent.


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[36] The advertisements (ads) in question were broadcast on television and radio during the 2006

election period (except on the blackout day) in the local area of each participating campaign. The

Party was responsible for the production and the content of the ads. Except for the tag line which

showed the official agents authorization, these ads would be the same ones that the Party had

already used or was concurrently using in its national campaign to promote the Party and its leader.

[37] When soliciting for participation in the RMB program, the selected campaigns were

informed that the Party would finance their campaign's commitment to the program by way of

monetary transfers between the Fund and the respective campaigns' bank account.

[38] The evidence shows that the Party did in fact finance candidates' contributions using the

following scheme: first, the Fund issued an invoice to the official agent. Simultaneously, the official

agent completed a wire transfer form instructing the same amount indicated in the invoice to be

transferred from the campaign to the Fund. This wire transfer form was signed and sent back to the

Fund, who filled in any missing information. The Fund then prepared a second wire transfer,

directing the same amount of money to be transferred from the Fund to the candidate. Finally, after

the transfer from the Fund was completed, the wire transfer form completed by the official agent

was sent to the bank to have the money paid right back.

[39] Indeed, during the 2006 election, the Fund transferred some 1.2 million dollars to the 67

local campaigns participating in the RMB program. The totality of this amount was returned to the

Fund by way of these in and out transfers with each participating candidates.


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[40] By December 19, 2005, the London and Dartmouth campaigns had both agreed to

participate in the RMB program. According to a Party document entitled ROC CANDIDATE

ALLOCATION (as of Dec 19/05), both Dartmouth and London had committed to contribute

$10,000.00.

[41] Retail Media Inc. (RMI), the company who was already acting as the supplier/agency of

record for the media buys made by the Party, was the intermediary responsible for booking

broadcast time for the participating campaigns, including Dartmouth and London.

[42] The Fund eventually billed the Dartmouth campaign an amount of $3,947.07, including

GST, as appears from the invoice numbered MBUYROC050019 dated December 23, 2005, which

was duly paid on January 11, 2006. The same amount was claimed as an election expense by the

applicant L.G. Callaghan. In the return filed on May 19, 2006 on behalf of Robert A. Campbell

(Dartmouth), said election expense is identified as the 2005-2006 Candidate share of media

advertisement.

[43] The Fund also billed the London campaign the amount of $9,999.15, including GST, as

appears from the invoice numbered MBUYROC050013 dated December 23, 2005, which was duly

paid on January 10, 2006. The same amount was claimed as an election expense by the applicant

David Pallet. Again, in the return filed on May 11, 2006 on behalf of Dan Mailer (London), said

election expense is identified as the 2005-2006 Candidate share of media advertisement.


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[44] In both the Dartmouth and London ridings, the ads which ran during the 2006 election

contained tag lines that identified the ads as having been authorized by the applicants.

[45] By separate, but almost identical letters dated April 23, 2007, the applicants were advised

that the claimed advertising expenses would be excluded from the amount that the respondent

would certify for reimbursement by the Receiver General, on the ground that the CEO was not

satisfied that the documentation submitted establishes the claimed election expense.

[46] The present judicial review application was commenced on May 14, 2007. It is noteworthy

that similar refusal letters were sent to other official agents of Conservative candidates on April 13,

April 23, and on August 27, 2007. While there were 34 official agents originally named in this

application, Mr. Callaghan in his capacity as official agent for Robert Campbell, and Mr. Pallet in

his capacity as official agent for Dan Mailer, are the only remaining applicants.

III REASONS FOR REFUSING TO CERTIFY THE CLAIMED EXPENSES AND THERELATED EVIDENCE

[47] The impugned decisions were not the result of an analysis conducted solely by the

respondent. According to the evidence on record, questions had been raised by Elections Canada

representatives during the audit of the electoral campaign returns filed by certain Conservative

candidates. It is of note that these concerns, which gave rise to the decision to refuse to certify, were

not borne out of the returns filed by the candidates who are represented by the applicants in the

present application.


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[48] For a couple of months prior to the final decision being made, there were on-going

discussions between the Party and Elections Canada. As a result of these communications, the Party

supplied Elections Canada with additional information concerning the RMB program.

[49] Elections Canada was informed by the Party in January 2007 that there was no single

contractual document between the registered party of the candidates and the supplier [RMI] that

speaks to the arrangements of regional media buy.

[50] In early April 2007, a meeting was held between Party representatives, including Ms. Susan

Kehoe, then Chief Financial Officer of the Fund, and representatives of Elections Canada. During

this meeting, the Party requested that Elections Canada attempt no further contact with Conservative

candidates on the basis that no further information would be provided.

[51] While the decisions under review are the decisions encapsulated in the two letters addressed

to the applicants, dated April 23, 2007, these letters were not the last communication between

Elections Canada and the Party. On April 25, 2007, the respondent provided the following reasons

in support of his decision to refuse to certify to the Receiver General all RMB expenses claimed by

Conservative candidates for the 2006 election that had not already been reimbursed:

My decision in relation to the media buy program was made on thebasis of my assessment of the circumstances surrounding thatprogram, which remain unresolved. Among other things, theseincluded the fact that the internal invoicing between the party and thecandidates was not adequately supported by third party documents,coupled with the absence of correlation between the various


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campaigns' share of the costs for the advertisements and theircommercial value with respect to those campaigns. While there maybe different ways of assessing the commercial value, the basis upon

which it is done must be a reasonable one. Commercial value cannotbe solely based on each campaign's willingness and ability to supporta particular amount. This has been in the past, and remains, theposition of Elections Canada.

As stated above, the circumstances surrounding the media buy areunder review by the Commissioner of Canada Elections and you maywish to communicate with him if you have any questions in thisregard.

[52] In a nutshell, in addition to reiterating that the information provided by the candidates and

the Party was insufficient and raising the issue of the commercial value of the claimed advertising

expenses, the respondent politely informs the Party that he has reasons to believe that the Party has

done something illegal, hence, his decision to refer the matter for investigation by the

Commissioner.

[53] A few months after the present application was initiated, in her affidavit dated January 14,

2008, Ms. Janice Vzina, the Associate Deputy Chief Electoral Officer, Political Financing, and

Chief Financial Officer in the Office of the Chief Electoral Officer of Canada, explained that in

addition to the grounds of refusal already mentioned, Elections Canada was concerned with the lack

of documentary evidence that could assist in establishing the existence of a contractual

arrangement [between] any of the participating candidates in the media buy program [and] the

supplier (RMI) for the purchase of the advertising.


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[54] Moreover, Ms. Vzina highlighted the fact that the respondent, in coming to his decision,

manifestly considered two important contextual elements:

(a) One was the fact that the content of the advertising itself did not directly promote the

candidates who were claiming the expense. As such, the ads failed to dispel the

doubts that had already been raised as to whether the expenses were truly expenses

of the candidates campaigns;

(b) The other was the fact that the Party was close to its authorized spending limit under

the Act, such that it could not claim the ads as a part of its expenses without

overspending.

[55] At this point it should be mentioned that the Commissioner is currently investigating

whether or not the Party or Fund incurred expenses exceeding their election expenses limit contrary

to paragraphs 497(1)(1) and 497(3)(g) of the Act, in addition to whether, contrary to subparagraph

497(3)(m)(ii), the Fund filed an election expenses return that it knew or ought to have known

contained a materially false or misleading statement.

[56] As part of this investigation Ronald Lamothe, Assistant Chief Investigator for the Office of

the Commissioner of Canada Elections, made an ex parte application to the Ontario Superior Court

of Justice for a search warrant pursuant to section 487 of the Criminal Code, R.S.C. 1985, c. C-46.

[57] This application was granted on the basis of an Information sworn by Mr. Lamothe, and a

search warrant was issued enabling the search of the offices of the Party and the Fund. The search


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was executed April 15 and April 16, 2008, and some 22 boxes of documents and a number of hard

drives were seized.

[58] This being said, the Court was informed by counsel at the hearing that the Commissioners

investigation, which commenced more than two years ago, is still on-going. There has been no

formal accusation brought by the DPP under the Act against either the Party or the Fund.

IV THE PRESENT PROCEEDING

[59] Subject to section 28 of the Federal Courts Act, R.S.C. 1985, c. F-7 (the FCA), the Federal

Court has exclusive original jurisdiction to issue an injunction, writ ofcertiorari, writ of prohibition,

writ ofmandamus or writ ofquo warranto, or to grant declaratory relief, against any federal board,

commission or other tribunal exercising powers conferred upon them by an Act of Parliament

(sections 2 and 18 of the FCA).

[60] This supervisory role of the Court extends beyond formal decisions; it encompasses the

examination of the legality of a diverse range of administrative actions, including those that maybe

taken by the respondent under Part 18 of the Act:Rae v. Canada (Chief Electoral Officer), 2008 FC

246 at paragraph 13 (Rae); Stevens v. Conservative Party of Canada, 2004 FC 1628, aff d 2005

FCA 383 (Stevens).

[61] The question that is now before this Court is whether the respondent can legally refuse to

certify for the purposes of reimbursement under section 465 of the Act, the claimed advertising


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expenses on the ground that he is not satisfied that these expenses have actually been incurred by

the applicants or the candidates for whom they act as official agents.

[62] The applicants are requesting from the Court, a writ ofmandamus to force the respondent to

deliver new certificates to the Receiver General, which include the claimed advertising expenses,

and/or a writ ofcertiorari to set aside the impugned decisions either with or without directions for

the respondent.

V STANDARD OF REVIEW

[63] Mandamus is a remedy used to compel the performance of a public legal duty. In order for

the Court to grant an order ofmandamus, there must exist a legal public duty to act; the duty must

be owed to the applicant; the Court must be satisfied that the applicant has a clear right to the

performance of that duty; there must be no other adequate remedy available; the order must be of

some practical value or effect; there must be no equitable bar to the relief sought; and, the balance of

convenience must warrant the issuance of the order:Apotex Inc. v. Canada (Attorney General),

[1994] 1 F.C. 742 at paragraph 45 (C.A.), aff d [1994] 3 S.C.R.1100 (Apotex).

[64] As such, the issuance of a writ ofmandamus writ does not require the determination of the

appropriate standard of review. When a decision must be made, mandamus will apply even if there

is discretion as to how the decision can be decided. For example, mandamus is still available where

the decision-maker has fettered his or her discretion by relying upon irrelevant considerations or

otherwise acting contrary to law: Donald J.M. Brown, Q.C. and the Honourable John M. Evans,


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Judicial Review of Administrative Action in Canada, vol. 1 (Toronto: Canvasback Publishing Inc.,

2009) at paragraph 1:3230 (Brown & Evans);Apotex, above, at paragraph 45.

[65] If the test for a mandamus set out inApotex, above, is met, this Court must issue the order.

In certain circumstances, certiorari can be combined with mandamus because when a decision has

already been made, it may be necessary not only to quash that decision, but to force the decision-

maker to take specific action: Brown & Evans, above, at paragraph 1:3300.

[66] In the case at bar, if the conditions for the issuance of a writ ofmandamus are not met, the

applicants nevertheless seek an order in the nature ofcertiorari to set aside the impugned decisions.

[67] With regard to the writ ofcertiorari, the applicants argue that the CEO has no discretion

under section 465 of the Act to review or consider the accuracy of an electoral campaign return filed

by or on behalf of a candidate pursuant to section 451. The applicants suggest that the applicable

standard of review is that of correctness and therefore, this Court ought to issue a writ ofmandamus

requiring the respondent, in accordance with section 465 of the Act, to issue a certificate that

includes the claimed advertising expenses to the Receiver General.

[68] On the contrary, the respondent argues that the CEO has the discretionary power to conduct

a simple audit, a complete audit, or to conduct no audit at all. When the CEO chooses to audit, his

decision must be reviewed on a reasonableness standard. This is so, particularly because of the

expertise of the CEO and the nature of the question, namely mixed fact and law.


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[69] There is no privative clause in the Act preventing the Court from examining the legality of a

refusal by the CEO to certify claimed election expenses. Whether or not an expense should be

certified for reimbursement by the Receiver General is not a polycentric question; such a

determination can only be made on a case by case basis and after an examination of the evidence

submitted by each campaign.

[70] The scope and interpretation of section 465 of the Act, which is a jurisdictional provision, is

a pure question of law and should be subject to a standard of correctness. Whether or not a

particular expense claimed by a candidate or a registered party is an election expense eligible for

reimbursement is a question of mixed fact and law. First, the CEO must interpret subsection 407(1)

(the definition of election expense), and then, he must apply this definition to the facts.

[71] As noted inDemocracy Watch y. Campbell, 2009 FCA 79 at paragraph 21 (Democracy

Watch), unless there is an extricable question of law, questions of mixed fact and law are generally

reviewed on the same standard as questions of fact, namely reasonableness. However, where there

is an extricable question of law, depending on whether the question is one of central importance to

the legal system or outside the scope of the decision-makers powers, the question may be reviewed

on either a standard of correctness or a standard of reasonableness. (Democracy Watch at

paragraph 22).

[72] In the present application, the respondent's decision to refuse to certify the claimed

advertising expenses for reimbursement pursuant to section 465 of the Act necessarily includes an


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interpretation of election expense as provided in subsection 407(1). The interpretation of each

element mentioned in subsection 407(1) is an extricable question of law. The overall interpretation

of subsection 407(1) and its related provisions is of central importance to the legal system.

Moreover, the CEO does not possess a relative expertise over the Court in interpreting the financial

provisions contained in Part 18 of the Act. This is implicit from the comments made and the general

approach taken by the Federal Court of Appeal in Stevens v. Conservative Party of Canada, 2005

FCA 383 at paragraph 26 (Stevens II). Therefore, the respondent's interpretation of subsection

407(1) and its related provisions is subject to review on a standard of correctness. That said, the

application of this interpretation to the facts, is subject to review on a reasonableness standard.

[73] A reasonableness review involves the determination of whether a decision falls within a

range of possible, acceptable outcomes that are defensible with regard to the law as well as the

evidence that was before the decision-maker at the time the decision was made (Dunsmuir v. New

Brunswick, 2008 SCC 9 at paragraphs 46 and 47 (Dunsmuir)).

[74] The facts will differ from case to case. In practice, however, a decision by the CEO to

certify claimed expenses comes with no reasons, no explanation and no context. Indeed, at the time

the impugned decisions were made, the respondent had already accepted to certify the claimed

advertising expenses of 17 candidates who participated in the RMB program. In the case of the

respondent's refusal to certify the claimed advertising expenses of the other 50 candidates who

participated in the RMB program, including the applicants, the reasons given by the respondent are


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minimal, to say the least. The letters sent by the respondent hardly permit the Court to follow the

reasoning that led to the refusals in question.

[75] With respect to the existence of a tribunal record, the Court is left in this case with only

the Candidate Contact Log. Summary (Log), pertaining to the two candidates for which the

applicants were acting as official agents, and the documentation submitted by the applicants or by

the Party on their behalf. Unfortunately, the Logs do not help the Court determine what could have

been the specific reasons, if there were any, to exclude the claimed advertising expenses for the

purpose of reimbursement.

[76] No deference should be shown to the respondent or any other Elections Canada personnel

with respect to the interpretation of the Act. Provided that the requirements mentioned in section

465 are met, the respondent has no discretion to exclude from certification any expense actually

incurred by a candidate that constitutes an election expense under section 407.

[77] In view of the foregoing, with respect to the legality of the respondents refusal to certify the

claimed advertising expenses on the ground that there is insufficient documentation or proof on

record establishing that these expenses had actually been incurred by the applicants, the Court must

consider the circumstances surrounding the RMB program, as well as the facts which are particular

to the applicants situations.


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[78] As stressed by this Court inEli Lilly and Co. v. Apotex Inc., 2009 FC 991 at paragraph 364,

[s]tandards of review are neither useful nor designed to address situations where the evidentiary

record before the Court is different than the one before another decision-maker. This is the case in

the present application, since both the applicants and the respondent have submitted extensive

material and evidence which were never before the decision-maker.

[79] Thus, the legality of the impugned decisions must be assessed as if this were a proceeding

de novo.

VI SCOPE OF THE CHIEF ELECTORAL OFFICER'S DUTIES UNDER SECTION 465 OFTHE ACT

[80] As their first proposition, the applicants submit that the respondent is under a legal duty to

certify the claimed advertising expenses under section 465 of the Act. According to the applicants,

the decision to certify is not a discretionary one; the respondent must simply verify that the

documentation referred to in section 451 has been submitted by the candidate and his or her official

agent.

[81] In this regard, the applicants submit that the respondent has no jurisdiction to commence an

audit into the accuracy of the information contained in the electoral campaign returns; nor does he

have the power question the authenticity of any document supporting a claim for reimbursement.

The investigating powers of the respondent under section 465 of the Act, if any, amount to a

document review, and nothing more.


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[82] Even in the face of a false document, the applicant asserts that the respondent is required to

certify the expense for reimbursement. The only recourse available to the CEO under such

circumstances would be his ability to refer the matter to the Commissioner who, unlike the CEO, is

empowered to conduct investigations and pursue the prosecution of a candidate and/or his official

agent.

[83] According to the respondent, the primary issue in this case is whether it was reasonable

for the CEO, in light of the circumstances before him, to decide that the candidates did not incur

the election expenses in question. A secondary issue, the respondent submits, is the basis of

allocation (or lack of) used by the applicants and the Party in general, to distribute the cost of the

RMBs.

[84] The respondent argues that the CEO has the discretionary power to conduct a simple audit, a

complete audit, or to conduct no audit at all. Elections Canada's audit process relies on the self-

reporting system created by the Act. When an electoral campaign return and its supporting

documentation submitted by the official agent and the candidate are in order, the audit process can

be relatively straightforward.

[85] However, if a red flag is raised in the course of the review of the return, this can result in a

higher level of scrutiny that requires additional audit steps to be undertaken. This is what happened

in the case at bar according to the respondent.


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[86] The Elections Canada audit process for the 2006 election involved the review of electoral

campaign returns for over 1,600 candidates. As of January 2008, registered parties had received

some 27 million dollars in reimbursement of election expenses, while reimbursement to candidates

totalled nearly 24 million dollars.

[87] In the case of 17 of the official agents for Conservative candidates who participated in the

RMB program, their electoral campaign returns had already been reviewed and the final instalment

of their reimbursement processed before Elections Canada was alerted, in autumn 2006, to the fact

that the RMB program might warrant closer examination.

[88] This red flag did not come from the applicants, but came from another official agent for a

Conservative candidate who demonstrated a lack of knowledge regarding the media buy purchase

when speaking with a representative from Elections Canada. Furthermore, during the same

conversation, the official agent referred to contributing a portion of his candidates spending limit

to the Partys national advertising.

[89] This led the respondent to make a formal request for additional documentation from all

Conservative candidates that listed the claimed advertising expenses in their electoral campaign

returns. Ultimately, the respondent was not satisfied that the advertising expenses claimed in

relation to the RMB program were actually incurred by the candidates, including the candidates

who are represented by the applicants in the present application. This conclusion led to the CEOs


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decision to exclude these expenses from the amount to be certified to the Receiver General for

reimbursement under section 465 of the Act.

[90] Some 1.2 million dollars were transferred during the 2006 election from the Fund to the

67 campaigns who agreed to participate in the RMB program. The respondent concedes that in and

out transactions between a registered party and a candidate, during an election period, are not

prohibited by the Act. However, in the present case, the respondent submits that the RMB program

was a sham which illegally permitted the Party to transfer to participating candidates the liability it

incurred for the broadcasting of national advertising.

[91] At the hearing before the Court, the respondent raised the concern that larger parties who

have access to greater resources could, by way of in and out transactions, increase their

advertising capabilities. Once they reach their spending limits, larger parties could finance their

candidates advertising campaigns and ensure that the content of these campaigns are equally

beneficial to the partys, or its leaders, platform. This is what the respondent suggests that has

happened during the 2006 election with the implementation by the Party of its RMB program.

[92] The respondent also presses the Court to conclude that allowing the RMB program would

render spending limits meaningless and give rise to unwarranted reimbursements. The respondent

argues that the Court finding in favour of the applicants in this case would be the equivalent of the

Court allowing candidates to avoid their spending limits by transferring their expenses to the Party

or to other candidates in less competitive ridings.


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[93] In essence, the respondent submits that the Court should give effect to an interpretation of

the Act that preserves the integrity of the spending limits and confers discretionary power on the

CEO to decline to certify election expenses incurred by campaigns, which have been financed

entirely by a registered party.

[94] The applicants reply, however, that it is not for the CEO to determine the appropriateness of

the content of ads used by parties and their candidates nor to examine the legality of transfers made

by a party to a campaign (as long as these transfers are reported by the party, which is the case

here). They submit that local issues are not necessarily the most important elements in a local

election campaign. In fact, party or national issues can be more important and since each candidate

also represents his or her party in the riding, it should be open to them to use and emphasize the

party platform in their advertising campaign.

[95] This is what happened here according to the applicants who submit that they have actually

incurred the advertising expenses claimed in their returns.

[96] While the applicants make clear that they are not making a Charter challenge with respect to

the CEOs decision, they argue that to look at the content of advertisements and to disallow the use

of this type of party branding would be to infringe the Charter protected freedom of expression.

According to the applicants each candidate and registered party should be free to address any

political issue. The CEO has no jurisdiction to regulate the level playing field created by the

provisions found in the Act (see Conservative Fund Canada, above).


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[97] The Court dismisses extreme positions taken in this case by the applicants and the

respondent. Clearly, the respondent had the right and duty to audit the returns submitted by the

candidates who participated in the RMB program. However, the respondent did not enjoy an

unfettered discretion to decline to refuse to certify the claimed advertising expenses.

[98] Without this Court coming to a decision, even if the respondent has raised a legitimate issue

concerning the inappropriate use of transfers between registered parties, who enjoy broad public

financing, and their candidates, Parliament, and not this Court, is the authority suited to make the

necessary changes. Nothing would prevent Parliament from amending the Act to limit the amounts

that can be transferred during an election from a party to a candidate.

[99] While the democratic right to vote in a federal election is guaranteed to every Canadian

citizen by section 3 of the Canadian Charter of Rights and Freedoms, there is no provision in the

Act, and no judicial declaration made by the Supreme Court of Canada or the Federal Court of

Appeal, conferring quasi-constitutional status to the Act or any of its provisions. Furthermore, the

respondent has not put forward any argument that alludes to the fact that any constitutional right

guaranteed by the Charter or fundamental principle enshrined in the Constitution may come into

play in this case if the CEO is not allowed to play an extended role in ensuring that a certain level

playing field is respected by participants.

[100] At present time, the CEO is the independent and neutral steward of the integrity of the

electoral process and [c]are should be taken to ensure that the impartiality of this critical role is


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not unnecessarily compromised actually or potentially, in the eyes of the public by enacting a

regime that would call upon the Chief Electoral Officer to make judgment calls on how a political

party is conducting its internal affairs or spending its funds (Longley v. Canada (Attorney

General), 2007 ONCA 852 at paragraph 74) (emphasis added).

[101] While it is of great important that the integrity of the electoral financing regime be preserved

and the Act seek to create a level playing field for those who wish to engage in the electoral

discourse (Harper, above, at paragraphs 62 and 102), Parliament has expressed no clear intention

in the Act to empower the CEO to play a general regulatory or supervisory role in the creation or

enforcement of rules regarding the financing of electoral campaigns or the conduct of participants.

At present, the CEO has not been given the power by Parliament to fill gaps in the Act.

[102] In the Courts opinion, the powers and duties of the CEO under sections 435 and 465 of the

Act are presently limited to the power to audit and verify the accuracy or reasonableness (in light of

the legislative reference to commercial value) of expenses reported by candidates and registered

parties for the purpose of reimbursement by the Receiver General. Thus, the fact that the RMB

program put in place by the Party in December 2005 is unprecedented in scale (67 campaigns) and

financing (approximately 1.2 million dollars), does not by itself give the CEO licence to refuse to

certify advertising expenses duly incurred by the participating campaigns.

[103] The Court accepts that a clear distinction must be made between an audit, which is for the

purpose of reimbursement under the Act, and an investigation, which is for the purpose of bringing


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a criminal charge under the Act. In the case of a criminal prosecution, the prosecuting party must

prove the requisite elements of the offence beyond a reasonable doubt, which may require the proof

of intent, before a person can be found guilty by a court. On the other hand, the purpose of the audit

is simply to ensure that the candidate and/or registered party are entitled to have their claimed

election and/or personal expenses reimbursed.

[104] Thus, the Court reiterates that the CEO has no power under the Act to conduct a general

investigation into the manner that a registered party spends its funds or helps finance its candidates

campaigns during an election. Indeed, in cases where the CEO suspects that a person is not

complying with the Act, his duty is to refer the matter for investigation by the Commissioner. That

being said, the Court cannot endorse the overly restrictive view of the powers under sections 435

and 465 put forward by the applicants.

[105] In the case at bar, the Court is not asked to review the internal affairs of a party; it is the

Public Purse that finances the electoral regime. In our democratic society, Parliament decided to

improve the participation of individuals and registered parties in the election process by providing a

mechanism through which certain electoral expenses could be partially reimbursed with public

funds. Given the value of taxpayer dollars, it is necessary to ensure that the contributions received

and the expenses incurred by candidates and registered parties are accurately reported.

[106] The amount of funds reimbursed under sections 435 and 465 of the Act can be significant.

When it comes to ensuring that that the appropriate sums of money are claimed from Her Majesty


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under the Act, there is an analogy that may be made between the role of the CEO and Elections

Canada personnel and the role that the Minister of National Revenue and the Canada Revenue

Agency exercise under a number of fiscal statutes.

[107] The applicants rely heavily on the general comments that were made on behalf of the

Federal Court of Appeal by Justice Dcary in Stevens II, above. In that case, the Federal Court, and

then the Federal Court of Appeal, was called upon to determine the legality a decision by the CEO

to authorize the merger between the Progressive Conservative Party and the Canadian Reform

Conservative Alliance. It was as a result of this merger that the current Conservative Party of

Canada was created. Contrary to the provisions of the Act, the CEO had accepted the merger

application on the same day it was filed. The legality of the decision in question essentially turned

on the interpretation and application of sections 400 to 403 of the Act, which are not in issue in the

present case.

[108] The Federal Court held that there was an error of law because the CEO did not wait the

required 30 days before accepting the merger application and amending the registry as required by

subsections 400(1) and 401(1)(a) of the Act. However, in exercising her discretionary power,

Justice Heneghan refused to set aside the CEOs decision, finding that while made contrary to law,

the error had no material effect (Stevens, above, at paragraph 118).

[109] The Federal Court of Appeal held that the general rule was that the CEO may and must

accept information provided to him assuming that it is being provided by an authorized person and


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that it is accurate (Stevens II, above, at paragraph 26). Thus, as it was stated by Justice Dcary, the

role of the Chief Electoral Officer, when he is to make a decision on a [merger] application

submitted to him, is limited, in general, to ensuring that, on the face of the documents submitted by

persons duly authorized, the conditions required by the Act are met (Stevens II, above, at paragraph

27) (emphasis added).

[110] In my humble opinion, what was stated by Justice Dcary cannot be applied to the context

of an audit of election and personal expenses claimed by a registered party or a candidate for the

purpose of reimbursement by the Receiver General pursuant to sections 435 and 465 of the Act. In

the case of a merger application, what is in issue is really the will of the merging entities. Hence, it

would be surprising if the Act allowed the CEO to embark on an inquiry into the circumstances

behind a merger, when this is really an internal matter between the members of particular political

parties.

[111] As recognized in the jurisprudence and doctrine, the words of an Act are to be read in their

entire context and in their grammatical and ordinary sense harmoniously with the scheme of the

Act, the object of the Act, and the intention of Parliament (Bell Express Vu Limited Partnership v.

Rex, 2002 SCC 42 at paragraph 26;Re Rizzo & Rizzo Shoes Ltd., [1998] 1 S.C.R. 27 at

paragraph 21; Elmer A. Driedger, Construction of Statutes, 2nd ed. (Toronto: Butterworths, 1983) at

page 87). As a result, the interpretation of section 465 of the Act cannot be divorced from its place

within the Act or from its place within the legislative scheme designed for reporting electoral

expenses incurred by registered parties and candidates.


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[112] While the CEOs powers have been characterized as mechanical (Stevens II, at

paragraph 19), pursuant to paragraph 16(d) of the Act, the Chief Electoral Officer shall [...]

exercise the powers and perform the duties and functions that are necessary for the administration

of this Act Indeed, with respect to a candidate's electoral campaign return, the Act specifically

allows the CEO to require the official agent to provide by a specified date, any additional

documents the CEO deems necessary, if he is of the opinion that the documents evidencing

expenses set out in the electoral campaign return are not sufficient (see subsection 451(2.2)).

[113] In accordance with section 465 of the Act, before providing the Receiver General with a

certificate, the CEO must be satisfied that the candidate and his or her official agent have complied

with the requirements of subsection 447(2) and sections 451 to 462 (emphasis added). This

requires the CEO to be satisfied that the election expenses return accurately reports the election

expenses of the candidate.

[114] For this to be the case, the expenses reported as election expenses must have been incurred

by the campaign and they must be reported at their commercial value (see sections 406, 407 and

other related provisions). These requirements necessitate that the CEO have the power to conduct an

audit of the electoral campaign return and other documents referred to in section 451.

[115] This now brings us to the examination of the legality of the impugned decisions in light of

sections 406 and 407 and the related provisions of the Act which address the issues of election

expenses and their proper reporting.


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VII WHAT CONSTITUTES A REASONABLE ELECTION EXPENSE INCURRED BY ACANDIDATE?

[116] In determining what constitutes a reasonable election expense incurred by a candidate, and

more particularly, in order to determine whether an election expense has been reasonably incurred

by a candidate if it was incurred for the purpose of contributing to a regional media buy organized

by a registered party, the Court will first review a number of basic legal concepts and then

examine the past practices of the CEO.

A BASIC LEGAL CONCEPTS

[117] Pursuant to section 406 of the Act, an electoral campaign expense of a candidate is an

expense reasonably incurred as an incidence of the election, and it includes, inter alia, an "election

expense" and a "personal expense" as defined in sections 407 and 409, respectively.

[118] A personal expense of a candidate is an electoral campaign expense, other than an election

expense, that is reasonably incurred by the candidate in relation to his or her campaign (section

409). A candidates personal expenses are not subject to the election expenses limit.

[119] Candidates and registered parties share a common definition of election expense, which is

found in subsection 407(1) of the Act:

407. (1) An election expenseincludes any cost incurred, ornon-monetary contributionreceived, by a registered party ora candidate, to the extent that theproperty or service for which the

407. (1) Les dpenseslectorales sentendent desfrais engags par un partienregistr ou un candidat etdes contributions nonmontaires qui leur sont


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cost was incurred, or the non-monetary contribution received,is used to directly promote or

oppose a registered party, itsleader or a candidate during anelection period.

apportes, dans la mesure oles biens ou les services faisantlobjet des dpenses ou des

contributions servent favoriser ou contrecarrerdirectement un parti enregistr,son chef ou un candidatpendant une priode lectorale.

[120] When one reads subsection 407(1) of the Act in conjunction with the reporting requirements

applicable to both registered parties and candidates (sections 429 to 434 and sections 451 to 462,

respectively), to satisfy the definition of election expense, the following three criteria must be met:

(i) the expense must be incurred by the entity reporting the expense; (ii) the goods or services for

which the expense is incurred must be used during the election period; and (iii) the goods or

services for which the expense is incurred must be used to directly promote or oppose a registered

party, its leader or a candidate. This third element is sometimes referred to as the purpose test.

Expense incurred by the entity reporting the expense

[121] In the Oxford English Dictionary, 2d ed., the verb incur is defined as: ...to become

through one's own action liable or subject to; to bring upon oneself... [t]o cause to be incurred; to

bring on or upon (some one); to entail... Likewise, in theBlack's Law Dictionary, 9th ed., the verb

incur is defined as: [t]o suffer or bring on oneself (a liability or expense).

[122] Section 446 of the Act provides that a contract involving an expense in relation to a

candidate's electoral campaign is not enforceable against the candidate unless it is entered into by


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the candidate personally (paragraph (a)); the candidates official agent (paragraph (b)); or a person

whom the official agent has authorized in writing to enter into the contract (paragraph (c)).

[123] In this regard, paragraph 446(c) has to be understood in relation to its actual purpose, which

is to protect local campaigns from being held liable for expenditures that could be in excess of their

spending limit, that neither the candidate nor the official agent authorized. With this in mind, it is

clear that the purpose of section 446(c) is not to prohibit contracts (whether written or oral) entered

into by persons other than the official agent or the candidate that are later ratified by the official

agent through payment. Payment for a good or service, whether at the time the deal was made or

after the good or service is provided, is recognition of a liability or debt incurred.

[124] Accordingly, the Court finds that the respondent, or Elections Canadas representatives,

erred in law in requiring that there be actual written contracts between the candidates or their

official agents and the supplier of the advertising services that were provided in December 2005 and

January 2006. Payment for these advertising services in January 2006, by the official agents of

participating candidates, is proof that these services were duly authorized. Moreover, as illustrated

below, the requirement to have actual written contracts appears to be contrary to Elections Canadas

and the CEOs past practices with regard to RMBs.


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Non-monetary contributions received by a candidate

[125] Pursuant to paragraph 407(3)(a) of the Act, an election expense includes a cost incurred for,

or a non-monetary contribution in relation to the production of advertising or promotional material

and its distribution, broadcast or publication in any media or by any other means.

[126] According to subsection 2(1) of the Act, a contribution includes both monetary and

non-monetary contributions. A monetary contribution is defined as an amount of money that is

not repayable, while non-monetary contribution is defined as the commercial value of a service,

other than volunteer labour, or of property or of the use of property or money to the extent that they

are provided without charge or at less than their commercial value (subsection 2(1)).

[127] Excluded from the definition of contribution, and therefore not subject to restriction, is the

provision of goods or services, or the transfer of funds (other than trust funds) between different

political entities, i.e. a registered party, an electoral district association (EDA) or a candidate

endorsed by the party (see subsections 404.2(2) & (3) of the Act). This is an important means for

both candidates and parties to increase funds available for election expenditures, however, unlike

transfers between different political entities, it is prohibited by the Act for a candidate to provide

goods and services or to transfer funds to another candidate (see subsections 404.2(2); (2.1); (2.2)).

[28] One of the conclusions that may be drawn from the above information, therefore, is that it is

not illegal for a party to incur expenses on behalf of a candidate and then bill a candidate for those

expenses. Similarly, it is not illegal for a party to acquire goods or services and then resell them to a


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candidate. In both cases, however, the transactions must be duly reported. Where the party transfers

funds to a candidate to finance that candidates purchase of goods or services supplied by the party,

the result is what is referred to as an in and out transaction.

[129] That being said, any difference between the amount actually paid back to the party and the

commercial value of the good or service provided or sold to the candidate (taking into account any

amount transferred to the candidate) will have to be reported as a non-monetary contribution

received by the candidate. This is because the full commercial value of the good or service provided

or sold to the candidate is considered an election expense of the candidate, as explained above.

Purpose test

[130] The respondent submits in his written memorandum that the object and scheme of the Act

require subsection 407(1) to be read disjunctively, resulting in the following definition:

407(1) An election expense includes any costs incurred, or non-monetary contribution received, by a [ ... ] candidate, to the extentthat the property or service for which the costs was incurred, or thenon-monetary contribution received, is used to directly promote oroppose [...] a candidate during an election period.

(Emphasis added.)

[131] According to the respondent therefore, to be an election expense for a candidate, the election

expense must be used to directly promote or oppose a candidate, and not a registered party or its

leader. The Court does not accept the respondent's disjunctive interpretation outlined above. A plain

reading of subsection 407(1) does not authorize the Court to discard the words used by Parliament

in enacting this provision. Rather, a plain reading favours the conjunctive interpretation that was


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found in material published by the CEO prior to the 2006 election. Namely, an election expense for

a candidate can be one that exclusively promotes a candidate, or it can be one that directly promotes

both a candidate and a registered party or its leader.

[132] In all cases, claimed election expenses, including advertising expenses, must satisfy the

purpose test set out in section 407 of the Act. However, a review of the documentary evidence on

record confirms that a rather pragmatic and flexible approach has been adopted by Elections Canada

and the CEO in ascertaining whether advertising expenses incurred by candidates during an election

meet the purpose test.

[133] Indeed, the evidence on record confirms that in the past, the CEO has generally refrained

from inquiring into the content of ads, despite the fact that "election advertising" is defined as "the

transmission to the public by any means during an election period of an advertising message that

promotes or opposes a registered party or the election of a candidate, including one that takes a

position on an issue with which a registered party or candidate is associated" (emphasis added)

(section 319).

[134] In the 1997 federal election, national political parties were not allowed to conduct

advertising on the day before polling day (June 1, 1997) nor on the day of polling (June 2, 1997)

pursuant to section 48 of the Act (as it read at the time). That said, the provision in the Act that

contained a similar restriction applicable to candidates had been struck down on Charter grounds

by the Alberta Court of Appeal in Somerville v. Canada (Attorney General) (1996), 136 D.L.R.


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(4th) 205 (Alta. C.A.); therefore, while registered parties could not advertise on those days, there

was nothing prohibiting candidates from doing so.

[135] In his report on what transpired during the 1997 federal election, the broadcast arbitrator

stated as follows:

The criteria applied to determine whether specific advertisementswere to be accepted for broadcast were the identity of the sponsorand that of the body or person invoiced. The content of theadvertisements accepted was subject only to the freedom of

expression guaranteed by the Charter. As a result, a number ofindividual candidates purchased time on the day before polling andon the actual day of election. Since the time purchased was oftenused to run a national advertisement with a local tag line, thisrendered the prohibition in section 48 (on party advertising)somewhat ineffectual.

(Emphasis added.)

[136] It is important to emphasize that the broadcasting arbitrator accepted as candidate ads what

were in effect national ads with a local tag line, provided that the candidate had purchased the time.

While the comments made by the broadcast arbitrator relate specifically to those provisions of the

Act that deal with broadcasting, there is no evidence in the record that the CEO refused to certify

any of the advertising expenses incurred by candidates on the last two days of the 1997 election

period.

[137] As a result of the amendments made to the Act in 2000 (S.C. 2000, c. 9), the current

Blackout provision prevents everyone from transmitting any election advertising on polling day (see


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section 323). Therefore, advertising on behalf of both candidates and political parties is prohibited

on polling day and the difficulties encountered in 1997 no longer exist.

[138] Ms. Janice Vzina confirmed during the cross-examination of her affidavit that in addition

to the requirements that election advertising be incurred and paid for by the candidate, to be an

election expense, the advertising must also promotes the candidate (the purpose test). According to

Ms. Vzina, this last requirement is met so long as the candidate feels that the advertisement

promotes his or her campaign, regardless of the actual content of the candidate's ad. This means that

where the ad is the same as one used by the registered party the candidate is affiliated with, it can

still be found to satisfy the purpose test.

[139] On this issue, Ms. Vniza stated:

The message has to promote the candidate. The content can include

the Party leader, Party logo, Party platform. I think were mixing themeans and the end. The end purpose has to be to promote thecandidate, but the means can be to include Party promotion in thecandidate's ad... (Applicants Record, Vol. VI, Tab 16, page 1831).

[140] Thus, Elections Canada auditors, when auditing advertising expenses, will confirm that

there are supporting documents that evidence the legitimacy of the amounts claimed, but they do not

generally look at or have access to the ads or scripts themselves. In fact, copies of the ads are not

typically included in the supporting documentation provided with an electoral campaign return. In

many ways, therefore, an advertising expense is generally not looked at any differently by Elections

Canada auditors than any other expense.


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[141] The inclusion of a particular tag line in an election advertisement is not conclusive as to

whether the advertising expense meets the requirements of an election expense. Likewise, there

could be situations where advertising is broadcast by a candidate without a tag line as required by

section 320 of the Act, but the expense would still be treated as an election expense of the candidate,

for the purpose of reimbursement. In the latter situation, an offence may have been committed

under paragraph 495(1)(a) of the Act (failure to indicate authority for election advertising), but the

omission of the tag line would not effect the treatment of the expense under Part 18 of the Act.

[142] Over the years, the CEO has published various handbooks that articulate his interpretation of

the Act. Among these publications is the "Election Handbook for Candidates, their Official Agents

and Auditors" (the handbook). While this handbook provides insight as to how the CEO and

Elections Canada have understood certain provisions in the Act at various points in time, it is in no

way binding on the Court. Nevertheless, from a practical point of view, candidates and their official

agents are strongly advised by the CEO to seek independent legal counsel if they wish to depart

from the interpretation adopted by the CEO in the handbook.

[143] The evidence shows that for at least part of the nineties the CEO consider[ed] adherence to

[the] handbook as meeting the statutory handbook requirements for issuing [a] certificate for

reimbursement purposes (see the 1997 handbook). It seems, however, that in more recent times,

such assurances were not explicitly included in the handbooks published by the CEO.


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[144] Nevertheless, a reading of all the handbooks published by Elections Canada up to, but

excluding, the most recent handbook issued in March 2007 (the 2007 handbook), clearly suggests

that the CEO will treat as an election expense for the purpose of reimbursement, any cost incurred

by a candidate's campaign for the purchase of an ad that is used to promote both the candidate and

its affiliated party.

[145] The fact that the same ad would have been used by the party to promote itself on a different

occasion would not be considered a reason for refusing to certify such an expense.

[146] This liberal interpretation of section 407 is reflected in the different versions of the

handbook published by Elections Canada over time. For example, the handbook issued in

December 2005 (the 2005 handbook) provides:

Election advertising

Election advertising means the transmission to the public by anymeans during an election period of an advertising message thatpromotes or opposes a registered party of the election of a candidate,including one that takes a position of an issue with which a registeredparty or candidate is associated....

Identification of election advertising

All election advertising that promotes or opposes a registeredpolitical party or the election of a candidate, including taking position

on an issue with which a registered party or candidate is associated,must indicate that it is authorized by the official agent of thecandidate.

(Emphasis added.)


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[147] Indeed, the handbooks have even provided for the possible situation of a candidate and a

party agreeing to share an ad. According to the handbooks, if such a scenario arose, the CEO would

review the basis for allocating the cost incurred by each, to verify that it was reasonable. As

mentioned in the 2005 handbook:

...The following are examples of transfers:[404.2(2), 404.2(3)]

...a proportion of expenses incurred to promote or oppose acandidate or a party. Elections Canada will accept the basis ofallocation used by the official agent, provided that it is reasonable in

the opinion of the Chief Electoral Officer, and provided that theauditor agrees that the allocation is reasonable and in keeping withthis handbook.

[148] At the hearing before this Court, the respondents counsel explained that in such

circumstances, the reasonableness of the allocation would depend on the commercial value of the

election advertising and not the content of the ad. The issue would not be whether the message

seemed to favour either the party or the candidate more, since this would require an analysis of the

content of the ad, which auditors of Elections Canada are simply not trained to do.

[149] Therefore, in practice, aside from the legal limits on the freedom of expression as provided

by the Charter, the only restrictions on election advertising are the blackout provision in section 323

and the spending limits established in sections 422, 440 and 441 of the Act. Thus, accurate reporting

of expenses incurred during a federal election is essential if any effect is to be given to the

prohibition on exceeding these limits.


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B HYPOTHETICAL SCENARIOS WITH RESPECT TO CLAIMED ADVERTISINGEXPENSES

[150] According to the evidence on record, in the purchase of radio or television time, it is

common practice for registered parties, through their chief agents, to contract with intermediaries

that act as agents of record for the parties in their dealings with broadcasters. These

intermediaries, therefore, are the ones then responsible for the booking of advertising time.

Consequently, it is also common for registered parties to act as suppliers or agents for their

candidates who participate in regional media buys organized by the registered party.

[151] Moreover, the evidence on record, including the practices of other registered parties as set

out in the exhibits to Geoff Donalds affidavit (a political operations officer with the Conservative

Party), illustrates that there is a presumption that a candidate has incurred an advertising expense if

said expense has been paid from the candidate's campaign account.

[ 152] In most instances, RMBs will not pose any problem for the CEO, provided that the expenses

are reported by participating candidates and/or the registered party in their respective returns.

[153] Thus, in order to assess the reasonableness of the grounds invoked by the respondent to

decline to certify the claimed advertising expenses, it is useful to examine various hypothetical

scenarios in which the respondent will generally accept to certify (the first three scenarios) or refuse

to certify advertising expenses claimed by candidates (the fourth scenario).


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[154] The following four hypothetical scenarios help to illustrate the application of section 407 of

the Act with regard to advertising expenses incurred in four different fact situations. It should be

noted that the content of the ad is not a concern in any of these scenarios.

First scenario: sharing of an advertising expense between a candidate and a party (orbetween candidates)

[155] A candidate and a party (or two or more candidates) may decide to jointly incur an

advertising expense in order to purchase an ad that promotes both the party and the candidate (or all

participating candidates). In this scenario, each contributor pays a portion of the cost.

[156] In practice, one participant may purchase the ad and act as a supplier to the other

participants. Another possibility is that one participant obtains written authorization to incur the

expense on behalf of all participating candidates (see subsections 438(5) and 446(c)). In any case,

only the agent of the participant is allowed to pay the supplier (who may be a different entity

depending on how the purchase is structured), since payment must be made in accordance with

subsections 416(1) and 438(4).

[157] The portion paid by each participant will constitute an election expense that will count

towards their respective spending limits and will give rise to a reimbursement pursuant to sections

435 and 465 of the Act. The portion reported by each participant must reflect the commercial value

of the expense, and in this regard, the allocation between the participants must be reasonable

(section 406).


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paid by the party is reported in the party's annual return as a non-monetary transfer to the candidates

(see section 424). Since non-monetary transfers to candidates are permitted, this type of

arrangement is not problematic as long as the transactions are properly reported.

[162] On the other hand, if the participating candidates have collectively reported 50% of the

commercial value of the ad, but have individually failed to properly report their correct share, the

situation is more complex. In the case of multiple candidates who jointly incur an expense,

unreasonable allocation (i.e. disregard for the commercial value) may effectively lead to one

candidate making a non-monetary contribution to another candidate, a transfer that is not permitted

under the Act. However, it is perfectly in line with the Act if the remaining 50% of the ad is

properly incurred and reported by one candidate, but benefits other candidates in some unintentional

way. These spill over effects on neighbouring ridings is unavoidable and of no legal consequence

to the other candidates.

Second scenario: purchase of advertising by a candidate from a party

[163] A candidate may be the sole purchaser of an ad from a party acting as the supplier. The

entire expense must be reported at commercial value as an election expense of the candidate, and

the full value would count towards the candidate's spending limit. If the expense is paid by the

candidate, the expense would give rise to a reimbursement.

[164] In this scenario, the party acting as a supplier does not incur an election expense since the

goods or services purchased were not used to promote the party, but rather, were sold to a candidate


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for use in their election campaign. The party would not report any election expense and no

reimbursement would be available pursuant to section 435 of the Act. This type of transaction

would be reported in the party's annual financial return (section 424) but not in its election expenses

return (section 429).

[165] Whether the candidate relies on money provided by way of a transfer from the party to pay

for the purchase of advertising (subsection 404.2(2.2)), or whether the candidate relies on monetary

contributions received from individual supporters (section 404) is irrelevant, all that matters is that

there was a true purchase and that the goods and services were provided by the party.

[166] It is this second scenario that is illustrated in Exhibits 14 and 16 to Geoff Donalds Affidavit

(Applicants Record, Vol. I, Tab 7, pages 210-220 and 226-234). According to the evidence on

record, a group of candidates appear to have jointly purchased a radio ad from the New Democratic

Party (NDP) during the 2006 election. Based on the evidence, it seems that the cost of the ad was

allocated equally among the candidates, but that the NDP transferred money to the candidates to

help subsidize the purchase. Since the NDP provided money to the candidates, the transfer of

money would be reported in the candidate's electoral campaign return as a monetary transfer from

the NDP as well as in the partys annual financial return as a monetary transfer to the candidates.

[167] As in the hypothetical scenario, the NDP acted as a supplier. It follows that the NDP should

not have reported as a party election expense the commercial value of the ads (or any portion of the


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cost the ads) used by the candidates to promote their campaign. If it had, this would have been a

mistake and a correction could have been sought.

Third scenario: a gift of advertising to a candidate by a party

[168] A party may buy advertising and then give it to a candidate or group of candidates who

decide to use it to promote their campaigns.

[169] In this scenario, the purchase of an ad that is provided as a gift (i.e. without charge) to the

candidate by the party would not constitute an election expense for the party and would not give rise

to a reimbursement pursuant to section 435 of the Act. If it is used by the candidate during the

campaign to promote his or her election, the candidate would need to report the commercial value of

the ad as a non-monetary transfer from the party. The commercial value of the ad would also

constitute an election expense for the candidate and would count towards the candidates spending

limit, but it would not give rise to a reimbursement, because it is not a paid expense (section 465).

Finally, the party would be required to report the cost of the ad as an expense and similarly, it would

be required to report its gift of the ad to the candidate as a non-monetary transfer. Both of these

transactions would be reported in the party's annual financial return (section 424).

[170] That being said, if the party had also used, on a separate occasion, the same ad to promote

itself or its leader during the election period, the commercial value of the ad would count as an

election expense of the party and would have to be reported as such. The party would be entitled,


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however, to have the amount it paid for the use of the ad partially reimbursed pursuant to section

Documents

Decision Callaghan